Chinese authorities have accused Mark Reilly, former head of GlaxoSmithKline's operations in the country, of ordering employees to commit bribery following a ten-month investigation.
The charge, reported by the state-run Xinhua news agency, was brought by police in Changsha, Hunan province against British-born Mr Reilly and two Chinese executives, Zhao Hongyan and Zhang Guowei. The latter who was vice president and human resources director of GSK China, told Xinhua that the global headquarters imposed high sales growth targets and "when Reilly took over the post, the company's strategy shifted from profit-oriented to sales-oriented".
Zhang added that the sales target in China was raised every year to compensate the reduction in US and European markets. Xinhua also published a pretty damning interview with operations manager Liang Hong who confirmed that those who met sales targets "received big bonuses, promotions and overseas vacations while those who failed were demoted or fired".
In a statement to police, Liang said every sales rep was allowed to spend 3,000 (some $480) to 5,000 yuan on kickbacks to doctors. "If this was not enough, they could apply for more. For hepatitis drugs, the bribe paid to doctors "can account for 5%-8% of the drug's price," he said, but for other drugs it might be as much as 30% and total hundreds of million yuan.
According to the police (and again reported by Xinhua), Mr Reilly and his colleagues are accused of forging transactions between GSK China and several foreign arms of the company, making the revenue look like funds used to purchase raw materials in China. They made every effort to cover up the illegal practice during regular checks by regulatory authorities and found that "all pharmaceutical factories and departments of GSK China nationwide had been involved in commercial bribery".
GSK noted that it had met with with the Chinese Ministry of Public Security and was told that the case is now in front of the Changsha People’s Procurator. “We take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of GSK", the firm said, adding that "we will continue to fully co-operate with the authorities in this matter".
GSK concluded by saying “we want to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of China and its citizens".
The news has come as a bit of the shock to some observers who are surprised that a British executive could get a maximum sentence of life in prison. In December, Prime Minister David Cameron lent his support to GSK and its activities in China on a high-profile trip where he was accompanied by the drug major's chief executive Sir Andrew Witty but it seems the authorities are not ready to ease up on GSK.
Since the bribery scandal in China first emerged last summer, GSK has started to overhaul its sales and marketing practices worldwide, including a new compensation system for reps. However claims are being investigated that bribes were also paid to doctors in Poland, Iraq, Jordan and Lebanon.